Aurelius Capital Partners has not yet responded to Citadel Broadcasting’s motion to have the bankruptcy court force Aurelius to sell its stock, but Aurelius has now filed with the US Bankruptcy Court a demand that Citadel’s Chapter 11 reorganization plan be rejected.
Aurelius claims the proposed plan violates the US Bankruptcy Code because it overpays Citadel’s senior lenders, while providing nothing at all to current shareholders. Also, Aurelius charges, Citadel management is getting stock options worth more than $100 million.
According to Aurelius, the reorganization plan “relies upon unduly pessimistic, low-ball financial projections that the Debtors’ management made over two months ago – at a time when valuations were substantially lower for all companies, and in particular broadcast companies. Since the business deal was cut, the financial markets have risen dramatically, the high yield and lending markets have improved significantly, and the Debtors’ operating results have outpaced management’s expectations substantially.”
The reorganization plan is based on a “stale valuation,” said Aurelius, indicating that it intends to file much more information with the court than its preliminary objection.
“If the Debtors’ enterprise was valued properly,” Aurelius insisted, “there would be more than adequate value to provide a full recovery to all creditors as well as a substantial distribution to Holders of Citadel Interests [the shareholders].”